Bad Credit Credit Cards

Written by Kevin Tavolaro
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People who have been turned down for credit due to an unfavorable credit rating might feel as though they'll never be able to establish decent credit again. Even worse, they may be led to believe that, in the future, they'll only be eligible for credit cards that carry extremely high interest rates, making it all the more difficult for them to resolve their debt. However, there is another option. Secured credit cards are not only available to people with bad credit, but they can also help restore negative credit ratings.

Secured credit cards are designed for people with bad credit, and can provide a line of credit equal to the amount that the card is secured for. A card is secured by either a preliminary cash deposit, or an affiliation with a bank account. For example, a secured card might require an initial deposit of one hundred dollars. The card can then be used to make the same amount in purchases. When the amount is depleted, another deposit must be made in order to continue using the card. The deposit "secures" the card, meaning that there is no danger of the balance being delinquent, as any money not paid against the balance can be withdrawn from the deposit.

Using Bad Credit Credit Cards

Although having to prepay for your line of credit may seem self-defeating, secured credit cards are just the first step in overcoming bad credit and acquiring an unsecured card. Regular payments on a secured card reflect favorably on your credit report. The alternative--applying for a credit card with an exceedingly high interest rate--won't necessarily guarantee the same thing. One of the factors that determine a card's positive impact on a credit report is the frequency of use. If you're already in debt, it's unlikely that you'll be able to pay off enough purchases made at a high rate of interest with the regularity required to boost your credit rating. Secured cards ensure that you're rebuilding your credit every time you use the card.

Secured credit cards can restore your credit rating quickly, meaning, after a period of successful usage, you might be able to get approved for a traditional, unsecured card. This is where the investment of the secured card pays off, as you can eventually close your secured account, at which point your initial deposit will be returned to you. If you were to use a high interest card as a substitute, not only would you be in danger of placing yourself in additional debt, but nothing is returned to you when you close the account. Secured credit cards are the most sensible credit alternative for people with bad credit.


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